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The COVID-19 pandemic is the biggest disaster to hit the sports world in 75 years

“The COVID-19 pandemic is the biggest disaster to hit the sports world in 75 years. It’s also the biggest challenge our business has ever faced” – this is what the chief executive of sports streaming group DAZN Simon Denyer said in relation to coronavirus. And we believe he’s right.

Almost the whole world of sports stopped since the COVID-19 pandemic. The Euro 2020 was postponed for the next year, while for the first time, the Olympics were postponed during a peaceful time.

Why is the business model of sports under such a significant threat at the moment? There are usually three main ways for the sports business to generate revenue – broadcasting deals, sponsorship contracts, and tickets income. At this moment, there’s nothing to broadcast, and the revenue from tickets is non-existent. This puts the world of sports in serious danger. A lot of companies and teams are under the threat of bankruptcy, and every next day with the coronavirus is increasing this danger.

One of the biggest worries is how fans will respond after sports events are restarted. Will they agree to go back to crowded stadiums while still being haunted by the COVID-19? This is a pretty good question in terms of psychology.

Another huge problem is how sponsors are reacting to the situation. Most likely, many of them will cut their spendings, knowing that another big world recession is coming this way. At this point, it’s not entirely clear how professional teams will survive with the enormous contracts which sports stars were signing so far. Many big sports projects could cease to exist, and the subject of cutting wages is going to be more and more discussed in the coming years. Don’t be surprised if you see a significant reorganization in the big leagues, which could lead to some teams changing their goals and sticking to smaller projects for the future.

According to the consultancy company KPMG, we can’t still evaluate how much money the sports industry is going to lose because of the coronavirus pandemic. According to the KPMG, the “big five” of the European football leagues – Premier League, La Liga, Serie A, Bundesliga, and Ligue 1, will lose almost four billion euro combined. And this is coming just from broadcasting deals, sponsorship, and matchday revenues. You can see that the situation is pretty severe.

One of the ways the sports world to get back some of this money is their insurance contracts. Competitions like the Olympics and the Wimbledon are covered by insurance in some ways, but for many others, the insurance contracts are not covering situations like the COVID-19 pandemic.

We already have some victims of the situation. One of the biggest Slovakian football clubs MSK Zilina and the USA Rugby, previously announced bankruptcy. We have many reasons to believe that many more will follow. Massive football clubs like Barcelona and Atletico Madrid already imposed pay cuts among their stars, and maybe some other clubs will follow. Meanwhile, FIFA is contemplating creating an emergency fund for clubs that are hurt by the crisis. But is there enough money for everyone?